Patent Issued for Intermediary payment method using interchange differential (USPTO 11004063)

2021 JUN 22 (NewsRx) -- By a News Reporter-Staff News Editor at Insurance Daily News -- A patent by the inventors Allen, Robert M. (Richardson, TX, US), filed on March 9, 2016, was published online on May 11, 2021, according to news reporting originating from Alexandria, Virginia, by NewsRx correspondents.

Patent number 11004063 is assigned to VPay Inc. (Plano, Texas, United States).

The following quote was obtained by the news editors from the background information supplied by the inventors: “

“This invention relates to payment processing. More specifically, it relates to providing an intermediary between a payor and payee that makes payments to payee using a virtual payment card account.

“Consumers make regular and continuing payments to vendors by “vaulting” their credit card data to facilitate subsequent payments. For example, users that make frequent purchases of digital music and/or smartphone software “apps” enter in their credit card information with an online store such as APPLE COMPUTER’s ITUNES brand service. The information will typically include the credit card number (PAN), its security code (CVC or CVC2), and expiration date. Additional information may include billing address verification (AVS) and the like. After this information is input the online store need only authenticate the user for subsequent authorized purchases. Vaulting of this data provides both security and convenience to both the consumer and the merchant.

“However, vaulting of card data does require certain infrastructure and security implementations. Therefore, card data is typically vaulted by the merchant actually receiving payment from the consumer. Third party vaulting services exist but cost substantial fees depending on the number of gateways, transactions and cards supported (typically per month).

“It would be advantageous if a third party intermediary could provide vaulting and payment facilitation between a consumer and a vendor without operating overhead, and alternatively, generating a profit. However, the problem is that card transactions themselves incur overhead called interchange. For example, when a doctor’s office accepts a credit card for a $100 patient co-pay, the office does not receive $100. There are substantial infrastructure and risk-costs in processing a credit card transaction. These costs take the form of interchange which can vary based on the payment card itself and also the circumstances in which the card is processed. Therefore, the doctor’s office may actually receive $97 on that $100 credit card transaction, wherein the $3-difference is the interchange fee. However, the doctor’s office will usually gladly accept the credit card transaction because it settles the patient’s financial obligation, it is widely expected by consumers and also permits the consumer flexibility in paying the amount.

“However, if a third party intermediary “vaulted” the patient’s credit card information and then made a separate payment on behalf of the patient, the intermediary would only get $97 from the first transaction. The intermediary would still need to pay the doctor’s office $100 but it only netted $97 from the patient transaction.

“Accordingly, a long felt but unfulfilled need exists for a third party platform to process vaulted credit cards on behalf of consumers to merchants. However, in view of the art considered as a whole at the time the present invention was made, it was not obvious to those of ordinary skill in the field of this invention how the shortcomings of the prior art could be overcome.”

In addition to the background information obtained for this patent, NewsRx journalists also obtained the inventors’ summary information for this patent: “An embodiment of the invention includes a method of effecting virtual card payments on behalf of a consumer whose card data has been vaulted. The steps include establishing an intermediary between a payor and a payee. The payor may be a consumer or another business seeking to make ongoing payments to one or more payees. The payee may be a vendor, merchant, service provider or the like. A first authorization is received for a first card payment by payor to the intermediary for a payment amount to the payee, the first card payment made using a card account selected by payor. For example, a consumer uses her own VISA card to pay $100 to a doctor’s office through the intermediary. The payor’s card account data is vaulted whereby it is keyed in to an online portal and stored in a database for future transactions. The card may also be of other types including, but not limited to, stored value cards, debit cards, and HSA (health savings account) cards.

“The first card payment is processed in the $100 payment amount to the intermediary at a first interchange rate associated with payor’s card account. In this example, we will set the first interchange rate at 1.75%. 1.75% of $100 equals a $1.75 interchange fee. That means the intermediary actually nets $98.25 in this first transaction.

“The intermediary then sends a second card payment in the $100 payment amount to the payee. The second card payment is associated with a virtual payment card account having a second interchange rate. In this example, we will set the second interchange rate to 2.5%. 2.5% of $100 equals a $2.50 interchange fee. Therefore, while the intermediary lost $1.75 on the first transaction of the vaulted payor’s card account, it gained $2.50 on the second transaction made to the payee thereby netting $0.75. Accordingly, the intermediary desires the second interchange rate to be greater than the first interchange rate. Adjusting the interchange rate is disclosed in U.S. Pat. No. 8,694,431 and co-pending U.S. patent application Ser. No. 14/179,132 filed Feb. 12, 2014, the specifications of which are incorporated herein by reference.

“In another embodiment of the invention, prior to processing the first card payment, the intermediary evaluates whether the second interchange rate chargeable through the second card payment is greater than the first interchange rate and rejects the first card payment in the event the second interchange rate is less than or equal to the first interchange rate. The intermediary may also reject payor card account types having known interchange rates above a predetermined threshold.

“In yet another embodiment of the invention, the intermediary varies the interchange rate of the second card payment by selecting a virtual card BIN having a preset interchange rate above that incurred by the payor’s card.

“In yet another embodiment of the invention, the intermediary processes the payor’s card to minimize the interchange rate incurred to the intermediary. This may be done by the inclusion of interchange factors selected from the group consisting of enhanced data, debit personal identification number, address verification service, security code and timely settlement.

“In yet another embodiment of the invention, the intermediary modifies the effective interchange rate of the second, virtual card payment by the inclusion or exclusion of interchange factors selected from the group consisting of card not present, enhanced data, debit personal identification number, address verification service, security code and delayed settlement.

“In yet another embodiment of the invention, the intermediary sets a threshold delta between the payor’s card interchange fees and the virtual card interchange fees, the threshold delta representative of the net profit incurred as the first transaction (payor’s payment to intermediary) cascades to the second transaction (intermediary payment to payee). For example, a threshold delta of $0.01 may technically be a profit but may not cover the intermediary’s overhead or profitability target. Therefore, unless the first transaction interchange can be lowered and/or the second transaction interchange be increased, the intermediary may automatically decline to process the payment from the payor to the payee.

“While the present invention is not limited to healthcare service copays, deductibles and co-insurance, it addresses a growing problems of bad debt suffered by medical professionals. In an Oct. 14, 2013 article from Bloomber BNA (Patients Pay Before Seeing Doctor as Deductibles Spread, Armour, Stephanie) notes that higher-deductible health insurance plans are causing an increase in bad debt expense for medical providers. Hospitals provided $41 billion in care for which no payment was received in 2011 up from $3.9 billion in 1980. Medical professionals clearly need a new system to facilitate the receipt of copays, deductibles and co-insurance payments by the patient.

“An advantage of the invention is that the consumer is not required to enroll with a service such as funding an account or establish a new cardholder relationship. Rather, the consumer simply uses the existing payment card he or she already has.

“Another advantage of the invention is that the consumer need only provide their payment card information once to the intermediary where it is “vaulted.” The consumer can then instruct the intermediary to make payments on the consumer’s behalf or upon preselected conditions (e.g., automatically pay Merchant ABC up to $500 per billing cycle).

“Yet another advantage of the invention is that most payment cards provide risk protection against fraud. The consumer has the protection of the consumer’s own payment card in addition to the protection of using a virtual payment card when making payment to the payee on the consumer’s behalf.

“Yet another advantage of the invention is that consumers don’t want to have to go to each one of their vendor’s websites (or call them) to provide card information to make a payment to that particular vendor. The present invention enables them to go to one place to pay everybody where enrolling for funding is easy.”

The claims supplied by the inventors are:

“1. A method for making payments using virtual payment cards without exposing a payor’s payment card data, the method comprising the steps of: vaulting the payor’s payment card data, by an intermediary payment processor, the vaulted data including a card number, a security code and an expiration date in a secure computer data store, the payor’s payment card having a predetermined, first interchange rate; generating by a computing system communicatively coupled to the data store, a token ID that corresponds to the vaulted payment card data; authenticating the payor’s identity through an electronic user interface, the payor’s identity associated with the token ID; receiving authorization from the payor to make payment to a third party payee in an amount authorized by the payor through the electronic user interface; generating a virtual payment card that is distinct from the payor’s payment card, wherein the virtual payment card is generated electronically and not reduced to a physical card; processing a first card transaction by a payment processor system communicatively coupled to the computing system, the payor’s payment card data being processed for the authorized amount to a merchant account for the intermediary payment processor whereby the merchant account is credited the amount authorized by the payor less the first interchange rate for the first card transaction; determining the first interchange rate for the first card transaction, wherein the first interchange rate is based on the inclusion or exclusion of interchange factors selected from the group comprising of card not present, enhanced data, debit personal identification number, address verification service, security code, and delayed settlement; generating a card request by the computing system for the virtual payment card in the amount authorized by the payor to the payee, wherein the virtual payment card is configured to have a second interchange rate greater than the first interchange rate of the payor’s payment card; and transmitting to the payee by the computing system, the virtual payment card on behalf of the payor whereby upon the processing of the virtual payment card in a second card transaction, the intermediary payment processor receives at least a portion of a difference between the second interchange rate of the second transaction and the first interchange rate of the first transaction, and whereby the vaulted payor’s payment card data is not exposed to the third party payee.

“2. The method of claim 1 further comprising the steps of: prior to processing the transaction, evaluating whether the second interchange rate chargeable through the second transaction is greater than the first interchange rate; and rejecting the first transaction in the event the second interchange rate is less than or equal to the first interchange rate.

“3. The method of claim 1 further comprising the step of rejecting payor card account types having interchange rates above a predetermined threshold.

“4. The method of claim 1 wherein the step of transmitting to the payee the virtual payment card, the transmission medium selected from the group consisting of electronic transmission and hardcopy delivery of the virtual payment card data whereby the payee may enter the virtual payment card data into a merchant card terminal for the processing of the virtual payment card.

“5. A method for making payments using virtual payment cards without exposing a payor’s payment card data, the method comprising the steps of: vaulting the payor’s payment card data, by an intermediary payment processor, the vaulted data including a card number, a security code and an expiration date in a secure computer data store, the payor’s payment card having a predetermined, first interchange rate; generating by a computing system communicatively coupled to the data store, a token ID that corresponds to the vaulted payment card data; authenticating the payor’s identity through an electronic user interface, the payor’s identity associated with the token ID; receiving authorization from the payor to make payment to a third party payee in an amount authorized by the payor through the electronic user interface; generating a virtual payment card that is distinct from the payor’s payment card, wherein the virtual payment card is generated electronically and not reduced to a physical card; processing a first card transaction by a payment processor system communicatively coupled to the computing system, the payor’s payment card data being processed for the authorized amount to a merchant account for the intermediary payment processor whereby the merchant account is credited the amount authorized by the payor less the first interchange rate for the first card transaction; determining the first interchange rate for the first card transaction, wherein the first interchange rate is based on the inclusion or exclusion of interchange factors selected from the group comprising of card not present, enhanced data, debit personal identification number, address verification service, security code, and delayed settlement; generating a card request by the computing system for the virtual payment card in the amount authorized by the payor to the payee, wherein the virtual payment card is configured to have a second interchange rate greater than the first interchange rate of the payor’s payment card; transmitting to a merchant acquirer for the payee by the computing system, the virtual payment card data as a straight through transaction on behalf of the payor whereby upon the processing of the virtual payment card in a second transaction, the intermediary payment processor receives at least a portion of a difference between the second interchange rate of the second transaction and the first interchange rate of the first transaction, and whereby the vaulted payor’s payment card data is not exposed to the third party payee; electronically receiving a response by the computing system from the merchant acquirer that the payment has been successfully processed; and notifying the payee of the payment to the merchant acquirer.

“6. The method of claim 5 further comprising the steps of: prior to processing the transaction, evaluating whether the second interchange rate chargeable through the second transaction is greater than the first interchange rate; and rejecting the first transaction in the event the second interchange rate is less than or equal to the first interchange rate.

“7. The method of claim 5 further comprising the step of rejecting payor card account types having interchange rates above a predetermined threshold.

“8. A virtual card payment system for effecting virtual card payments without exposing a payor’s payment card data, the system comprising: a storage device; a computer processor communicatively coupled to the storage device, wherein the computer processor executes application code instructions that are stored in the storage device to cause the system to: vault the payor payment card data, by an intermediary payment processor, the vaulted data including a card number, a security code and an expiration date in a secure computer data store, the payor payment card having a predetermined, first interchange rate; receive an authenticated payor identity through an electronic user interface communicatively coupled to the computer process, the payor identity corresponding to the vaulted payment card data; receive authorization from the electronic user interface to make payment to a third party payee in an amount authorized by the payor; generate a virtual payment card that is distinct from the payor’s payment card, wherein the virtual payment card is generated electronically and not reduced to a physical card; process a first card transaction by a payment processor system communicatively coupled to the computer processor, the payor payment card data being processed for the authorized amount to a merchant account for the intermediary payment processor whereby merchant account is credited the amount authorized by the payor less the first interchange rate deduction for the first card transaction; determine the first interchange rate for the first card transaction, wherein the first interchange rate is based on the inclusion or exclusion of interchange factors selected from the group comprising of card not present, enhanced data, debit personal identification number, address verification service, security code, and delayed settlement; generate a card request for a virtual payment card in the amount authorized by the payor to the payee, wherein the virtual payment card is configured to have a second interchange rate greater than the first interchange rate of the payor payment card; and transmit to the payee or merchant acquirer of the payee by the computing system, the virtual payment card on behalf of the payor whereby upon the processing of the virtual payment card in a second card transaction, the intermediary payment processor receives at least a portion of a difference between the second interchange rate of the second transaction and the first interchange rate of the first transaction, and whereby the vaulted payor payment card data is not exposed to the third party payee.

“9. The system of claim 8 further comprising application code instructions that are stored in the storage device to cause the system to: prior to processing the transaction, evaluate whether the second interchange rate chargeable through the second transaction is greater than the first interchange rate; and reject the first transaction in the event the second interchange rate is less than or equal to the first interchange rate.

“10. The system of claim 8 further comprising application code instructions that are stored in the storage device to cause the system to reject payor card account types having interchange rates above a predetermined threshold.”

There are additional claims. Please visit full patent to read further.

URL and more information on this patent, see: Allen, Robert M. Intermediary payment method using interchange differential. U.S. Patent Number 11004063, filed March 9, 2016, and published online on May 11, 2021. Patent URL: http://patft.uspto.gov/netacgi/nph-Parser?Sect1=PTO1&Sect2=HITOFF&d=PALL&p=1&u=%2Fnetahtml%2FPTO%2Fsrchnum.htm&r=1&f=G&l=50&s1=11004063.PN.&OS=PN/11004063RS=PN/11004063

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